Fancy titles, and a big pay cheque isn’t where the action is. You’re going to have to offer something with more meaning if you want to get Millennial superstars on your team.
Kenny Cheung, Chief of Procurement at The World Bank Group, talks about his early career, the importance of setting boundaries, and the skills procurement professionals will require in the future.
Kenny also draws on his experience working for some of the biggest names in Finance, across two continents, about why Millennials care more for the deeper meaning in their job, rather than the big salary or fancy title.
1. What were your first 3 jobs?
Retail Project Engineer at ExxonMobil;
Strategic Sourcing Consultant at ExxonMobil; and
Senior Category Manager at National Australia Bank.
2. What’s one thing you know now, that you wish you’d known at the start of your career?
The importance of setting boundaries personally and professionally. Boundaries are important for getting your priorities right, help manage expectations of others whilst ensuring you don’t get yourselves (and your teams) burned out.
In my pursuit of achievements, I realised I could accomplish more “quality” goals than “quantity” goals, if boundaries were set earlier in my career.
3. How can CPOs attract and retain Millennials?
CPOs ought to understand how to build broader purpose into their team’s mission, as well as the design of individual roles within their teams.
Millennials look for more than a famous brand, an impressive title or a good salary. They look for meaning in their roles, far deeper and holistic than previous generations.
4. What key skills are critical for procurement in the next 5 years?
Emotional Intelligence, Energy Management, Influencing, Networking, and Innovation.
5. How valuable have mentors been in your career?
Extremely. They provide me with some invaluable golden rules of career management as well as work-life integration fundamentals.
Build your personal workout plan, and get fit to meet procurement leaders’ needs! Take a step toward your next promotion by registering for Career Boot Camp today.
With an estimated 200 million suppliers operating around the world, how can you be sure you have the perfect partner? Fortunately, here’s where technology can lend a hand.
Recent estimates put the total number of suppliers operating around the world at a staggering 200 million. To put this in context, that’s like having every person in the UK operating a supply business. Three times over.
The risks for procurement in this scenario are there for all to see. With an enormous number of potential suppliers, how do you know you are dealing with the right ones? Are you getting the best deal you could?
And with the suppliers you do have on board, how are you driving contract compliance? As well as being expected to deliver the value in the contracts, procurement needs to ensure that objectives are aligned with internal stakeholders, including the CFO.
Innovation in ‘Tail’ Suppliers
Common thinking in procurement now is that the profession can no longer ignore small- and medium-sized suppliers. By continuing to use the same suppliers, procurement misses out on innovation opportunities, as well as savings opportunities.
Traditionally these suppliers have been dismissed as ‘tail spend’, and ignored in terms of strategy. As we experience a period of unprecedented market change and volatility, procurement is now looking to these same organisations to help drive efficiencies, and competitive advantage.
The other factor procurement must take into consideration is how to measure the risk within their supply chain. One slight issue from a first, second, or even third tier supplier, could have drastic consequences for an organisation’s reputation.
Technology as Competitive Advantage
If organisations want to thrive in increasingly volatile climates, they need to leverage their technology. Effectively using IT capabilities and procurement technology can help develop a competitive advantage.
More and more organisations are streamlining traditional procurement activities, and freeing up resources for strategic projects. The ability to do this, while sourcing and managing suppliers, requires up-to-date IT capabilities and analytics, as well as best in class procurement technology.
Oracle’s aim is to provide its client with complete, open, and fully integrated solutions which help to reduce both the cost, and the complexity, of the IT infrastructure.
David Hudson, Business Development Director at Oracle Cloud Solutions, believes procurement needs to realise that the future is now.
“Delivering the right capabilities for Procurement professionals to drive greater collaboration, process standardisation, increased efficiency at a reducing cost remains a big challenge.
“At Oracle, we aim to help our customers achieve great cost savings and overall value, while reducing supplier risk, and increasing compliance. Technology, such as our Strategic Procurement portfolio, can help to deliver these key benefits, particularly when integrated throughout the process, as part of a modern Cloud solution,” says David.
Build Your Competitive Advantage
Procurious Founder, Tania Seary, has previously stated that, “Today’s supply chain executives must be brave and bold. They are expected to handle cataclysmic events and act with extreme agility.
“There’s one qualification – and I would go so far as to say that it’s the defining qualification for today’s supply chain leaders – that separates the highest performers from the herd. And that’s courage.”
This courage can be bolstered by understanding the role and benefits of technology, especially Cloud software and platforms, in procurement strategy, planning and decision making. By being more informed, procurement leaders can make these bold decisions, and ensure they are staying ahead of the competition.
To find out more on how procurement can better manage risk and complexity, and integrate technology to help them thrive in a changing world, join Tania Seary and David Hobson for a free webinar on 7th November. Find out more information and register here.
Do you want to add more value to your organisation? Do you dream of being a CPO? Then Procurious’ Career Boot Camp is for you!
Calling all procurement and supply chain professionals! Are you impatient to add more value to your organisation? Do you dream of becoming a Chief Procurement Officer (CPO) in the future?
With globalisation and technological change disrupting every aspect of our profession, making time to update your skills can catapult you up the ladder.
Get Your Career in Shape
According to Deloitte’s third annual Global Supply Chain Survey, individuals with leadership acumen are in especially high demand.
79 per cent of supply chain executives surveyed by Deloitte said it was very important or extremely important for new hires to have leadership and professional competencies (to help with change management, problem solving, etc.).
In response to this need, Procurious is launching a free, exclusive 15-day Career Boot Camp programme to help high-achieving professionals around the world get in the best career shape of their lives, and upgrade their skills while on the go.
Starting the 19th of September, Boot Camp will feature a short, daily podcast, from a selection of top procurement leaders and business influencers.
But, individuals who wait will lose out! Each podcast will be available for just one day before being replaced by the next one in the series.
Listen, Learn, Discuss – and Advance!
The podcasts will showcase a variety of topics, from being your team’s MVP and networking your way to the top, to incubating your big ideas, all designed to give participants a career cardio boost.
Tom Derry, CEO of the Institute for Supply Management
Chris Sawchuk, Principal & Global Advisory Practice Leader, The Hackett Group
Dr. Tom Verghese, Principal and Consultant, Cultural Synergies
Stuart Brocklehurst, Chief Executive, Applegate Marketplace Ltd
Gabe Perez, Vice President, Strategy & Market Development, Coupa Software
Sigi Osagie, author, ‘Procurement Mojo’
Jon Hansen, co-author, ‘Procurement at a Crossroads’
And that’s not all! Each podcast will be accompanied by a blog article, and vibrant group discussions on the Procurious website.
We’ll also be hosting other articles and thought leadership pieces on every aspect of your career. Plus, we’ll be asking our senior procurement leaders to share the benefits of their career experience in our ’60 Seconds With…’ article series.
Build Your Workout Plan
The key thing to remember is that you can make Boot Camp fit to your schedule, and work for you. The beauty of Boot Camp is that it’s an entirely digital experience, which adds to Procurious’ current eLearning and skills development opportunities.
“The next generation in procurement needs to take the responsibility for their professional development into their own hands,” said Tania Seary, Founding Chairman of Procurious.
“Online learning is the fastest and easiest way to give yourself the skills you need. Just a few minutes a day can make the difference between standing still, or moving quickly into more impactful roles.”
So come on, don’t get left behind by your peers and colleagues. Build your personal workout plan, and get fit to meet these leaders’ needs! If you’re new to Procurious, try one podcast. If you’re a Procurious member, sign up for the whole programme!
Take a step toward your next promotion by registering for Career Boot Camp today.
New research has revealed the benefits organisations can realise by having a top-performing supplier diversity programme.
Full Benefits of Supplier Diversity Not Yet Achieved
Historically, supplier diversity programs have focused on a narrow combination of meeting government spend requirements, and participating in corporate social responsibility initiatives with under-represented communities.
Supporting corporate culture around diversity and social responsibility; and
Complying with regulatory requirements.
However, companies are starting to realise that they will not achieve maximum benefits from supplier diversity programs if their objectives stop there. In fact, by expanding the goals and activities of these programmes, organisations can gain access to new markets, innovative supplier partnering practices and avenues for improved corporate branding.
Several hurdles can prevent procurement organisations from obtaining the necessary support to invest in a supplier diversity programme. Often, business leaders worry that dedicating resources will ultimately mean sacrificing procurement savings.
However, The Hackett Group’s research suggests that not only do procurement organisations with top-performing programmes experience no dip in efficiency, but they extract even more benefits from the programme.
For example, 23 per cent of diverse suppliers often or greatly exceed buyers’ expectations and the majority of remaining diverse suppliers are meeting expectations.
Top-Performing Organisations Take Strategic Approach to Supplier Diversity
Supplier diversity is evolving from a check-the-box corporate social responsibility requirement, to a strategic enabler providing access to new and innovative products, and increased market share in new and developing communities.
Top-performing companies recognise this and have begun working toward achieving a broader range of benefits from their programmes. Successful ones typically address three areas: global expansion, supplier partnering and reputation management.
Supplier diversity programs usually start small and then grow in terms of domestic volume and geographic reach. Our survey found that 76 per cent of organisations have diversity programs that are currently limited to the domestic (U.S.) market.
Of this group, 40 per cent plan to expand their program globally in the next two to three years. Global expansion of supplier diversity brings additional benefits, including investment in global economic development and improved relationships with local suppliers and their communities.
Organisations should be sure to engage the appropriate partners before designing a global expansion of their programme. This can include corporate diversity groups and third-party diversity organisations.
Supplier partnering is the process of developing and enhancing relationships with suppliers. Small and minority-owned businesses can be the source of added benefits, including cost savings, process improvements and product innovations.
Investing in the development of local suppliers helps build productive relationships and prepares suppliers to be successful partners. Buyers should also identify candidates for strategic partnerships.
While this is frequently the most immature area of supplier diversity programs, benefits can be significant.
Developing a strong reputation for dedication to supplier diversity can result in increased market share and talent retention. There are multiple channels available to facilitate a clear and positive message regarding supplier diversity, including both internal- and external-reaching activities.
Procurement groups should look for reputation management opportunities that align with corporate objectives to increase collaboration between groups.
Organisations with strategic reputation management practices typical utilise some combination of social media and local, in-person interactions to interact with stakeholders and communities.
Programme Objectives Must Come from the Highest Levels of the Company.
Top-performing supplier diversity programs are developed and planned with substantial guidance from executive leadership.
Leaders of supplier diversity initiatives should make it a priority to create a culture supportive of diversity and inclusion, not just in procurement, but throughout the enterprise.
All diversity objectives, including supplier diversity, workforce diversity, and community and market interaction, should have the same strategic objectives in order to take advantage of a larger network and create a more collaborative workplace.
Laura Gibbons is a Research Director for The Hackett Group’s Procurement Executive Advisory Program. She has industry and consulting experience in areas such as purchase-to-pay, strategic sourcing, payment strategies, and organisational and process design. You can contact her on Procurious or via email.
Learn more about Hackett’s Procurement Executive Advisory Program here.
Global supply chains are sailing into troubled waters again this week following the bankruptcy of a major shipping firm.
A storm is brewing on the high seas for global supply chains thanks to the latest issue for the global shipping industry. One of the world’s largest shipping firms has filed for bankruptcy, having lost support from its national banks.
The bankruptcy comes at a time of major strife in the global shipping industry. A combination of oversupply of ships, and an undersupply of cargo, has led to a raft of mergers, acquisitions, and cost-cutting exercises.
As a result of the bankruptcy, Hanjin has stopped accepting new cargo from customers, while the situation spells trouble for those ships already in transit to and from Asia.
Dozens of ships have been denied entry to ports in North America and Asia, including South Korea’s largest port, Busan. This is due to concerns that the company wouldn’t be able to pay fees for loading and unloading of vessels.
In China, 10 ships operated by Hanjin have been, or are expected to be seized, on behalf of creditors. This is in addition to another vessel seized in Singapore earlier last week.
The South Korean Government has stated that it will start help to prop up the company, a move that will enable it to stop ships and other assets being seized. However, it is unlikely to save the operator, with experts stating that Hanjin will struggle to recover from losing both its business and reputation.
The company’s bankruptcy has opened the door for other operators to pick up the slack. However, the situation stands to make life more difficult for retailers, with holiday season shipping on the horizon.
Manufacturers are being forced to look for new routes for a number of products, while on some major trans-Pacific routes, shipping costs have jumped by up to 55 per cent. There are further concerns about the potential knock-on effect further down the supply chain.
Rising transportation costs, delays, and a reliance on Hanjin as a freight carrier, could push other trucking and logistics firms out of business too.
Retail Woes Continue
All of this is set to have a major impact on US retailers in the lead up to the traditional holiday season. Retailers are anticipating a two to three-month delay on the arrival of South Korean goods being transported by Hanjin.
“Retailers’ main concern is that there [are] millions of dollars’ worth of merchandise that needs to be on store shelves that could be impacted by this,” said Jonathan Gold, the group’s vice president for supply chain and customs policy.
The situation is the latest in a long line of shipping-related trouble for US retailers. In early 2015, a strike by West Coast port workers saw ships similarly stranded, causing months’ worth of delays.
Whether the impact this time around will be as great remains to be seen. Should cargo be released soon, retailers may not suffer as much as expected. However, irrespective of how long the delays are, it’s sure to test the resilience of major global supply chains.
Are you impacted by the Hanjin bankruptcy? Do you have contingencies in place to mitigate the delays? Let us know in the comments below.
Away from the high seas, we’ve been hunting down the top procurement and supply chain headlines this week…
Fire Closes Gap Distribution Centre
Gap Inc.’s main distribution centre in Fishkill, New York State, has been shut down after a massive fire damaged the premises.
All employees were safely evacuated, and investigators are working to understand the extent of the damage and cause of the fire.
The clothing and accessories retailer has launched contingency plans to move product through its North American network of distribution centres.
However, there are concerns that the disruption will create a bottleneck ahead of the upcoming holiday season.
When we think about global warming many of us immediately think about cars and industry ruining the planet, but does this tell the whole story?
While transportation, including travel by road, sea and air, contributes over 13 per cent of our annual CO2 emissions there is another factor, which we may not initially consider, but which has a bigger impact.
Figures highlighted by Farm Machinery Locator show that there are nearly 8.3 million cows in the UK alone. These cattle provide us with hundreds of thousands of litres of milk, and thousands of pounds of beef every day. We often assume that agriculture is natural and therefore can’t be damaging to the environment, but that assessment is wrong.
The ever-increasing amounts of farm machinery – tractors, cultivators, combine harvesters and balers – for sale and in use, only adds to the current issue of rising average temperatures across the world, due to the pollution they expel.
So, whilst being natural, the negative connotations of farming and the agricultural industry mustn’t be brushed over. We will explain the role livestock plays in global warming too, below.
Livestock’s Contribution to Global Warming
In fact, if we look at figures published by the Food and Agriculture Organization of the United Nations, agriculture contributes 18 per cent of the total release of greenhouse gases worldwide, a much higher figure than that for transportation.
Emissions from cattle are particularly damaging because it is not CO2 that cows are releasing, but methane. Every single cow releases between 70 and 120kg of methane per year. While this is a greenhouse gas like CO2, its detrimental impact on the planet is 23 times higher than the negative impact of CO2.
In addition, livestock cause over two-thirds of the world’s ammonia emissions, and this greatly contributes to acid rain. When you consider there are over 1.5 billion cattle worldwide the damage quickly adds up.
Livestock figures are rising because of the general increase in our level of prosperity, which brings with it a higher demand for beef and milk. It’s not only emissions from cattle however that are causing problems to the planet. Intensive farming also leads to a whole range of other environmental issues.
Land Clearance and Deforestation
Livestock now use over 30 per cent of the world’s available land. Much of this is used for grazing although there is also a substantial portion which is utilised to grow feed.
A need for all this space has been a major contributor to deforestation, and with deforestation a further release of CO2 into the atmosphere occurs. This comes about due to two main reasons.
First, as the trees are cut down, the carbon dioxide they store is released. Second, fewer trees leads to lower levels of photosynthesis, a process which would normally help to absorb carbon dioxide.
In addition, once land has been cleared, if it is then overgrazed it runs the risk of turning to desert. This has already happened on 20 per cent of pastureland.
Cows also use a substantial amount of water. Each cow requires 990 litres of water to produce just one litre of milk. As global warming continues an upward trend, water becomes ever more precious.
Furthermore many of the antibiotics and hormones used to treat cattle can end up in drinking water. This can then lead to risks to human health.
There will always be a level of pollution produced by livestock and ultimately this will wash down to sea level. Nutrient run off causes an overgrowth of algae which consumes oxygen in the sea.
This can kill coral reefs and lead to so called ‘dead zones’. One in the Gulf of Mexico is around 6,500 square miles in area. It has predominantly been caused by US beef production waste, which is carried down to the coast by the Mississippi River.
We all need to lower our carbon footprint. And when we realise how much of an impact agriculture has on the environment, we should consider reducing the amount of meat and milk we consume.
The planet’s population is growing substantially every year. The western diet, which is meat and dairy heavy, has a widening appeal, even in countries where fruit and vegetables used to be the mainstay of meals.
If we want to become greener in all areas of our lives we should all be a little more aware of the detrimental impact our own consumption of meat and milk is having and take steps to reduce it.
The Millennial generation has greater expectations in relation to job roles. Only by changing the way they engage Millennials can organisations meet these expectations.
At the Big Ideas Summit 2016, we challenged our thought leaders to share their Big Ideas for the future of procurement.
From ideas that have the potential to change the very nature of the procurement profession, to ones that got the assembled minds thinking about the profession’s impact outside of the organisation, the response we received was amazing.
Meeting Millennial Expectations
Nic Walden, Director – Procurement P2P Advisor at The Hackett Group, talks about the greater expectations that Millennials have for job roles.
These include expectations from on working on CSR projects, and building sustainable relationships, to the technology that they will be working with.
Nic argues that procurement needs to change the way it engages with the Millennial generation in the workplace to meet these expectations.
Old practices die hard, particularly in low-value procurement. However, an Australian start-up aims to change this.
The dubious, but common, practice of ‘get three quotes but still use the same suppliers’ is firmly under the spotlight. And, thanks to public scrutiny and increasing procurement governance, it might soon be gone for good.
A growing number of Australian Governmental agencies and private sector organisations are looking to make their spend more transparent. And many of these organisations are turning to a Melbourne start-up to increase their accountability.
Ending Entrenched Procurement Culture
Award-winning platform VendorPanel is revolutionising decentralised sourcing in corporate Australia, with growth in the past two years exceeding all expectations.
Launched in 2008 by James Leathem, VendorPanel has been through a number of iterations over the years. It aims to put an end to the corruption-riddled ‘three quotes and no change’ procurement approach that has become entrenched in Australian corporate culture.
The platform is used by hundreds of Australian organisations, predominantly government agencies, to increase transparency, compliance, and savings in quote and tender-based purchasing from their approved suppliers and the marketplace.
Leathem explains that low-value procurement had been largely ignored across public and private sector organisations in Australia. This represents a multi-million dollar risk for procurement professionals, with massive corporate financial leakage, and formal governance processes being allowed to fall through the cracks.
“It’s confusing and difficult for buyers. Traditional procurement systems and processes are complex. Buyers are left to navigate preferred supplier panels, approved contractor lists and the market with no real assistance. This complexity serves to make processes slow and painful, so buyers often just go with what they know,” he explains.
“Problems are compounded when staff are dealing with arrangements managed by multiple external departments or organisations, and where contract information is accessed via multiple websites, documents and intranets.”
Undetected Low-Value Procurement Expenditure
Most low-value procurement expenditure remains undetected. This is because it’s either hidden in email, or the transactional amount is too small for management to bother scrutinising.
This makes it pretty easy for an employee get away with giving low-value contracts to the same business every time, instead of a better performing, or cheaper, company.
“It’s not necessarily full-on corruption, but a ‘better-the-Devil-you-know’ approach of using familiar suppliers. Either way it can land professionals in hot water, particularly in government when it’s public money being spent,” Leathem says.
While the broader procurement industry complained about the issues that came with low-value procurement, nothing was being done to bring about change.
“There was a quiet acceptance that things were never going to change. Procurement professionals appeared resigned to the fact that a solution was impossible, because the problem was too big and messy. This was especially the case for procurement of Services.”
Leathem set out to disrupt the market after working with a professional services firm for corporate clients such as ANZ Bank, Fairfax Media, Macquarie and GE.
As part of his role, Leathem was involved in sourcing and engaging with supplier markets. The approach being taken was the best available to anyone at the time. It was a mostly manual approach using a series of internal databases and search processes.
“I saw an opportunity to automate the procurement match-making process by creating a honey pot that attracts the right people to you, rather than buyers always having to scour the market for what they’re after.”
Leathem started out by working with the local government sector, with the rationale that if it could work there, it could work anywhere. He secured a pilot across 155 local governments, and based on its success, VendorPanel was rolled out nationally across 550 local governments within 18 months.
The platform’s growth comes as the broader procurement industry searches for better, more efficient ways to tackle their role.
However, VendorPanel then had an unexpected challenge of showing the rest of the market that the technology was transferrable. Several years down the track this has been achieved, with hundreds of organisations now using the platform.
VendorPanel has now processed more than AUD$1.3 billion worth of sourcing from organisations’ own preferred suppliers, plus an undisclosed amount of public tenders and marketplace sourcing, making it one of the fastest growing technology companies in Australia.
If we’re to change the image of procurement, we need a figurehead to point to. Could Apple CEO, Tim Cook, be the ambassador the profession needs?
One of the key goals of Procurious is to improve the image of our profession. We are the brown cardigan brigade no longer (unless it’s a snazzy, modern cardigan!). The latest generation of procurement pros are highly intelligent, motivated, and tech-savvy.
However, to help push the image change along, procurement needs a figurehead. A high profile ambassador for the profession, who highlights just how far you can go. And Apple’s current CEO, Tim Cook, could be that ambassador we need.
We take a look back at an article from last year, highlighting Cook’s journey to the top.
Procurement’s Greatest Ambassador?
It’s fair to say procurement has received a bad rap over the years. We’ve been dubbed corporate policemen, paper pushers, roadblocks, as well as a raft of other unflattering names we dare not mention.
Thankfully, due to the innovation and hard graft of procurement professionals, the function is shedding this negative image and starting to become recognised as an integral part of any successful business.
Perhaps the greatest exemplar of procurement’s ascendancy to date is Apple CEO Tim Cook.
In 1998, Tim was the vice president of Corporate Materials for the Compaq computer company. The role saw him hold responsibility for the organisation’s procurement and inventory operations.
Despite having no real intentions of leaving this role, the enigmatic Steve Jobs managed to convince Cook to take on a role at Apple (pre iMac, iPod, iPad, and iPhone).
Tim’s performance at Apple was stellar, particularly from a procurement point of view. In his authorised autobiography of Steve Jobs, Walter Issacson described Cook’s methodical approach to supplier rationalisation and inventory management.
“Cook reduced the number of Apple’s key suppliers from a hundred to twenty-four, forced them to cut better deals to keep the business, convinced many to locate next to Apple’s plants, and closed ten of the company’s nineteen warehouses.
“By reducing the places where inventory could pile up, he reduced inventory. Jobs had cut inventory from two months’ worth of product down to one by early 1998. By September of that year, Cook had gotten it to six days. By the following September, it was down to an amazing two days’ worth.
“In addition, he cut the production process for making an Apple computer from four months to two. All of this not only saved money, it also allowed each new computer to have the very latest components available.”
The procurement and supply chain decisions made by Cook highlight the critical importance of procurement to Apple’s success. The strength of the company (and arguably its competitive advantage) has been in building and managing a complex network of suppliers.
The company has then successfully leveraged this network to produce ground-breaking technology products. Put simply, without the supply network, there is no product.
Recommendation From The Top
Cook’s performance in Apple’s supply chain clearly caught the attention of Steve Jobs, who gave the follow recommendation of Cook during his departure from the firm.
Jobs stated, “I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.”
The promotion of Cook to CEO shows that the board of Apple understands the critical importance of external suppliers as a source of innovation for the company. Apple clearly sees the procurement function as the conduit to successfully managing these relationships and ensuring the future success of the business.
Apple is the world’s most valuable brand. It has undergone a remarkably successful business transformation, and has produced products that have changed the way we interact with each other and the world around us.
With so much of this success being attributed to great procurement practices, could there really be a stronger endorsement for our profession?
“Tim Cook came out of procurement which is just the right background for what we needed.” – Steve Jobs
Understanding the benefits of Robotic Process Automation (RPA) can help sell adoption to the rest of the business.
In our first instalment, we described the fundamentals of robotic process automation (RPA), how it is typically used, and some pricing trends.
Here, we discuss some of the benefits of RPA, as well as what to think about as your organisation considers adoption.
The RPA Value Proposition
Purchase-to-pay organisations that are implementing RPA expect benefits in higher productivity and lower operating costs (Fig. 2).
These improvements are realised in a number of ways, including:
1. Ability to bypass the IT department
Because RPA does not require IT development resources, and calls for a very limited technical infrastructure, businesses are able to undertake these projects by themselves.
However, a big lesson learned from early pilots is that IT needs to be involved in some capacity early in the project, even though this may bring in extra bureaucracy and potentially slow down progress.
Getting IT to sign off on performance demands, system availability, security infrastructure, etc., will pay dividends later when RPA is in production.
2. Shorter, less expensive development cycle time
The typical timeline to develop and deploy RPA is six to eight weeks, dramatically less than traditional, IT-led application integration projects. The latter’s cost to design, program, test and maintain system interfaces is significant. In some instances, it can exceed the cost of the software itself.
The ability to link systems through the user interface layer in a non-invasive way, without these costs, is core to RPA’s value proposition.
3. Labour Cost Savings
RPA vendors claim to deliver as much as 60-80 per cent in savings. Feedback from participants in interviews conducted by The Hackett Group indicated that returns are much more modest, but still significant at 20-30 per cent.
4. Increased Auditability and Consistency with Fewer Errors
Routine tasks executed by humans are prone to errors and inconsistent application of rules. Robots apply the same set of rules consistently and operate without errors.
Furthermore, all tasks executed by robots are recorded, and these execution logs are auditable.
5. Improved Scalability
Human capacity is difficult to scale in situations where demand fluctuates, leading to inefficiencies such as backlogs or overcapacity.
In contrast, robots operate at whatever speed is demanded by the work volume. Multiple robots can be deployed when demand exceeds the capacity of a single one.
However, an RPA must still work within the performance limitations of the software with which it is designed to interact.
We predict that RPA may have an impact on the number of people needed to perform mundane, repetitive tasks. Ultimately, this is a good thing, because many of these resources can be reassigned to more rewarding activities and job satisfaction will increase.
Fortunately, this shift in the profile of source-to-pay talent is consistent with the direction that procurement has been heading in for some time, moving away from transactional work, to more of a trusted advisor and partner to the business.
This will require complex problem-solving abilities, interpersonal skills, emotional intelligence and intellectual curiosity. There will also be a strong need for people who understand how to orchestrate a combination of automation solutions to obtain the best results.
Patrick Connaughton is the Senior Research Director, Procurement Executive Advisory Programme at the Hackett Group. He has published groundbreaking research in areas like spend analysis, contract life cycle management, supplier risk assessments and services procurement. You can contact him via email or on Procurious.
You can also learn more about Hackett’s Procurement Executive Advisory Program here.